Doing business in Chile involves understanding the legal framework for foreign investment, the steps for company formation, and key aspects of Chilean business culture.
Here is a general guide:
I. Legal Framework and Entity Selection
Chile is known for its stable, open economy and favorable foreign investment laws. Foreign companies can be 100% owned by non-resident shareholders, and there are typically no foreign exchange controls.
Common Business Structures:
- Sociedad por Acciones (SpA) – Corporation by Shares: Highly recommended for foreign investors, startups, and small businesses due to its flexibility in shareholding and corporate governance. Can be formed with a single shareholder.
- Sociedad de Responsabilidad Limitada (Ltda.) – Limited Liability Company: Requires at least two partners (shareholders). Less flexible than an SpA for ownership changes.
- Empresa Individual de Responsabilidad Limitada (EIRL) – Individual Limited Liability Company: For a single individual, separating the individual’s personal assets from the business’s.
- Branch of a Foreign Company (Agencia): The foreign parent entity is fully liable for the Chilean branch’s activities.
II. Steps for Company Formation (Simplified)
While the process can be lengthy (often 6-8 weeks), the key steps are:
- Choose a Business Structure and Appoint a Legal Representative:
- Select the legal entity that best suits your needs (e.g., SpA).
- Appoint a Legal Representative in Chile. This representative must be a Chilean resident (national or foreigner with a valid residency visa) and will act on behalf of the company. A power of attorney (POA) must be drafted and signed to grant this authority.
- Obtain Tax IDs:
- Shareholders/Partners: All foreign individual or corporate shareholders must first obtain a Chilean Tax Identification Number (RUT – Rol Único Tributario). This often requires legalizing or apostilling documents from the home country (e.g., Certificate of Good Standing, POA).
- Prepare and Notarize the Articles of Incorporation:
- Draft the company charter (Escritura Pública), outlining the business purpose, capital, shareholding, and management structure.
- The document must be signed and notarized by a Chilean public notary.
- Register the Company:
- Register a summary of the incorporation deed with the Commercial Registry (Registro de Comercio).
- Publish an extract of the company’s formation in the Official Gazette (Diario Oficial)—usually within 60 days of notarization.
- Obtain the Company’s RUT (Tax ID) and Start of Activities:
- Register the new legal entity with the Internal Revenue Service (SII – Servicio de Impuestos Internos) to obtain its own RUT.
- File the “Start of Activities” declaration (Declaración de Inicio de Actividades).
- Open a Corporate Bank Account:
- This can be challenging for new foreign-owned entities and may require a physical visit by a representative and all company documents.
- Obtain a Municipal License:
- Apply for a Municipal License (Patente Municipal) from the municipality where the company’s fiscal address is located. This is required to legally operate.
III. Taxation and Compliance
- Corporate Income Tax: Generally 27%.
- Value-Added Tax (VAT – IVA): The general rate is 19% and applies to most goods and services.
- Withholding Tax: Applicable to certain payments abroad, such as interest (general rate is 35%, subject to tax treaties).
- Tax Treaties: Chile has an extensive network of double taxation treaties that can reduce withholding taxes.
- Annual Compliance: Businesses must file annual financial reports and tax returns (typically by the end of April).
IV. Business Culture & Etiquette
- Formality and Hierarchy: Chilean business culture is generally formal and hierarchical. Respect for authority and seniority is important.
- Greetings: A handshake is the standard greeting in business. Use formal titles like “Señor” or “Señora” followed by the surname until invited to use first names. Use the formal “usted” when speaking Spanish unless invited to use “tú.”
- Relationships: Building personal trust and relationships is key before diving into business details. Initial meetings often focus on getting to know each other.
- Punctuality: Punctuality is valued, and you should aim to be on time for meetings.
- Communication: Communication can be indirect, as Chileans often avoid direct criticism or confrontation to protect dignity. You may need to “read between the lines.”
- Dress Code: Business attire is conservative and formal (suits and ties for men, conservative suits or dresses for women).